Before World War I, the British government issued whatare called consols, which pay the

Chapter 9, Problem 81

(choose chapter or problem)

Before World War I, the British government issued whatare called consols, which pay the owner or his heirs afixed amount of money every year forever. (Cartoonistsof the time described aristocrats living off such paymentsas pickled in consols.) What should a person expect topay for consols which pay 10 a year forever? Assumethe first payment is one year from the date of purchaseand that interest remains 4% per year, compounded annually.( denotes pounds, the British unit of currency.)

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